As smallcap index drops over 4%, Capitalmind warns of further corrections
Capitalmind Financial Services stated that continued flat earnings could lead to a price correction in the small-cap index.
The PMS firm also noted that over the past year, the P/E multiple of the BSE Smallcap 250 has expanded by 63%, while the earnings per share (EPS) remains flat at -3%.
The aforementioned showcases that the expansion of the P/E multiple of BSE Smallcap 250 in the last year is mostly due to the increase in price.
Analysing the data for the period December 1, 2017 to July 11, 2024, Capitalmind Financial Services infers that median 6 months returns is best when the PE ratio is below 20 with median 6 months returns at 25.2%. The median 6 months returns turn negative as the PE ratio moves upwards of 30. The worst median 6 months return is in the PE ratio range of 35-40.
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Over the last four years, from July 2020 to July 2024, the percentage of stocks with PE less than 30 has reduced from 76% to 37%. During the same period, the PE range between 30 and 50 has increased from 13% in July 2020 to 29% in July 2024. During the same period, the PE range of more than 50 has moved up from 11% to 33%.
The BSE 250 smallcap index was trading in red today, with Cera Sanitaryware, PCBL, Tamilnad Mercantile Bank, TTK Prestige, V-Guard Industries and Aegis Logistics defying the overall market Sentiment.
Meanwhile MMTC, CAMS, Firstsource Solutions and KNR Constructions were the top losers of the index, dipping as high as 7.2%.
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